State universities in Germany have received the go-ahead to seek private investment for building projects to ease chronic overcrowding of seminars and lecture theatres.

The higher education planning committee, made up of representatives from federal government and the 16 states, agreed to introduce leasing arrangements and other means of private funding.

The decision has ended an investment standstill in higher education building caused by a long-running row over how much Bonn should contribute to capital spending projects. The federal government will now contribute only DM1.8 billion (Pounds 783 million) towards funding in 1996 - not the DM2.4 billion that university rectors and the science council had previously demanded.

Education minister Jurgen Ruttgers had also promised a further DM80 million for next year if the states agreed to accept his controversial plan for charging interest on student loans. But the states rejected this. A working group will now hammer out proposals for the funding of building projects incorporating private funding models by the end of this year.

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Jurgen Zollner, the Social Democrat minister for Rhineland Palatinate, who first came up with the leasing proposal, said even if new Fachhochschulen, laboratories and lecture halls were financed by leasing arrangements in future, an increase in government spending would be unavoidable.

This is because the number of students entering university is expected to rise from 0,000 to 380,000 in the next five years as children of the post-war baby boomers reach university age.

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Universities in east and west Germany already lack an estimated 900,000 places for the current 1.9 million registered students, Mr Zollner argued. In the face of these stastistics the federal government can no longer cut back at the expense of young people, he said.

Hans-Uwe Erichsen, president of the Conference of University Rectors, said he believed the leasing model would contribute to breaking the present deadlock over higher education policy between the national government and the states. But Elisabeth Altmann, education spokeswoman for the Greens, warned against any privatisation of higher education building. Disasters in private financing of supposedly well-calculated projects such as the Channel Tunnel should provide food for thought, she said.